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Regarding Class (6), £1,459, the claims, being against Hongkong only, the creditors will suffer by the amalgamation, the estimated loss to them being £643.
Class (c) creditors, that is, those creditors against Singapore only, £1,424, will benefit by the suggested pool of the assets by £514 in increased dividend.
In order that you may appreciate this point better, we may state that there appears little probability of Singapore paying much more than 20% to creditors, whereas, we are hoping for a distribution in Hongkong of 100%.
If the assets are pooled, the dividends will work out at about 56%, the gain to Singapore creditors being 36%, and the loss to Hongkong creditors, 44%.
We may mention that the sum of £1,260 is due to local creditors in Hongkong (included in Class (b)), and that the suggestion to pool the assets, by which the pro- bability of being paid 100% will be reduced at best to a dividend of 50%, will work a hardship on them, and appear inequitable in view of the law in Singapore under which the local creditors there were paid in full.
The sum of £1,260 mentioned includes the amount of £1,000 due to the Estate of the late Capt. Bunje. This Estate will lose £440 if the assets are merged.
We are enclosing herein statements showing the particulars of the three classes of creditors with details of amounts receivable in dividends by each creditor. These state- ments will also show the extent of the benefit or loss to each creditor under the proposed pool.
Another point which we think should receive consideration before a decision is made as to whether or not to pool the assets is the question of partnership. According to a partnership deed executed in March, 1914, the partners of the Hongkong firm are Carl Otto Georg Heermann and Otto Wagner. Mr. C. F. Heermann is not mentioned as a partner.
In a Power of Attorney dated the 20th January, granted to Mr. C. Bunje, Mr. C. F. Heermann described himself as carrying on business at Singapore under the style of Chas. J. Gaupp & Co. As the partnership deed between Mr. C. O. G. Heermann and Mr. Otto Wagner was not sigued until two months after, we cannot understand why Mr. C. F. Heermann was not a party to the deed, if in fact he was a partner of the Hongkong business.
If the Power of Attorney granted to Mr. Bunje is to be taken at its face value, and having in mind the doubts as to Mr. C. F. Heermann being a partner in the Hongkong business at all, we think it is a fair conclusion that the Hongkong and Singapore businesses are separate businesses. We must, however, state that we have always regarded Mr. C. F. Heermann as a Hongkong Partner, and have addressed him as such. In the abortive negotiations for the sale of the business in Hongkong, he was referred to as a partner, and his name appears in the draft deed as such. Our Mr. Williams, who is now on the return journey from Shanghai, may have further particulars regarding this apparent discrepancy. We expect him within the next couple of days, and if he has anything to communicate with regard to this, we shall advise you at once.
If Hongkong and Singapore are different partnerships there will be, we think, a difficulty in acting on the suggestion to pool assets. In fact, we think, that in this event, Hongkong should be allowed to prove in competition with the other creditors against Singapore for their indebtedness to Hongkong.
Another aspect of the question for consideration is to whom was credit given for goods supplied to Singapore. The firm's creditors had, by a long course of dealing, learnt to rely on Gaupp & Co., and not having received any notice (as seems probable) as to the constitution of the firm in Singapore, they may have considered that credit given to Singapore was in fact given to Hongkong. One creditor against Singapore, Marks & Cohn, £1,405, did take this view. We informed Mr. Lofts, their representative, of
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the 18th of March last, that the liquidations were entirely separate and that his firm's clain being for goods supplied to Singapore, his proper course was to apply to the Liquidator there, and we also urged him to consult his solicitors in the event of his not agreeing to our ruling. He expressed great dissatisfaction but we have not heard from him since.
Our view has always been that the liquidations are separate, but the position is full of difficulties and more so because of the law in Singapore allowing preferential rights to local creditors.
We desire to state that if it be decided to merge the assets, the proceedings in refer- ence to the validity of the Bank's lien, now in abeyance by consent, should be continued in the interests of all creditors in view of the large difference it would make to the lividend. We have no doubt you agree it will be our duty to do this in the event of the merger being decided upon.
We advised the Liquidator at Singapore in March last, that if the anticipated surplus in Hongkong be realised, we would have no objection to its transfer to Singapore provided the Hongkong Government so instructed us.
The Honourable
The Attorney General.
We have, &c.,
LOWE, BINGHAM & MATTHEWS,
Liquidators.
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